Don’t Advertise to Existing Customers, Says Serial Ecommerce Entrepreneur

Taylor Holiday runs three successful ecommerce businesses, a booming ecommerce-focused advertising agency, and an educational membership community for advertising matters. He’s developed definitive views on acquiring customers and advertising functionality, among other insights:
  • “Lifetime value is subjective. I prefer the term’money multiplier.'”
  • “Attribution is not important to us. It isn’t why an ad unit differs.”
  • “We don’t believe in using advertising dollars to market to existing customers.”

He’s an authority on ecommerce marketing, in other words. I recently spoke with Holiday about his ventures, the status of ecommerce, and marketing dos and don’ts. What follows is our entire audio conversation and a transcript, edited for clarity and length.

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Eric Bandholz: Please tell us about yourself.

Taylor Holiday: Our agency, Common Thread, is focused on helping people develop their ecommerce business. We function in the consumer-product ecommerce world, especially at the first stage of associations, from zero in annual revenue to about $30 million. Our job includes paid customer acquisition, conversion rate optimization, and innovative manufacturing — anything to help companies navigate that early stage.

We then use what we’ve learned with our very own ecommerce brands, that may be Fielder’s Choice Goods, Bambu Earth, and Slick Products. We all know what goes into creating an ecommerce business as we’re doing it every day alongside our clients. It’s a fun journey.

Bandholz: There are a whole lot of things I want to ask. You have three ecommerce sites, an agency, and an online community. You are running many businesses.

Holiday: Well, the wonderful news is I’m not. The key for a leader is to create an ecosystem. I don’t have any daily responsibilities inside 4×400, which is our ecommerce group. Andrew Faris is the CEO of this company. I’m more or less the chairman of the board, to collaborate. Our member community site, ADmission, is conducted by Grant Zanini and Adrianne Verheyen. My everyday responsibility now is the agency. I rely on awesome people to help build the rest.

Bandholz: Are the companies independent? Is there a parent?

Holiday: They’re owned by a holding company called Dream Labs, that is the total parent. Fantasy Labs also includes commercial real estate holdings and a culture development agency called Tell Me Your Dreams and a tiny influencer marketing agency. They’re all owned by Dream Labs. My partner Josh is the sole employee. He manages all of our legal and mergers and acquisitions — these kinds of things.

Bandholz: One of my mistakes in construction Beardbrand was Facebook advertising. Five years back, we were getting an obscene return on ad spend, something like five-times. I didn’t think that was good enough, and we pulled from Facebook altogether. In hindsight, I wish we would have pushed a bit harder. What other advertising mistakes do you see from ecommerce sellers?

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Holiday: I hear that comment from a variety of entrepreneurs which were running businesses in 2016 and’17. When I was running QALO, our wedding-ring site, my partner and I had that exact same feeling. Regular items were generating returns of five-to-one, six-to-one, whatever it was. And we didn’t have this feeling of the moment. It’s difficult to be present in that and figure out what the opportunity represents. In some ways, that’s the situation we find ourselves again now — the world is sort of falling around us during the pandemic. Ecommerce is undergoing this gigantic growth.

For us, as a service, across all our clients in virtually every course, April was a crazy record month of earnings. And so as we think about that. We ask ourselves,”What are the mistakes that we will make?” These windows, like today, they closed and open. There certainly indications, at least while we’re in quarantine, there are some massive chances in the ecommerce world.

What we’re seeing for ecommerce right now is all about demand creation, capture speed, and volume — not necessarily profitability. We’re seeing an influx of clients that are suddenly using ecommerce. For a while there, in the early days of the pandemic, CPMs were fairly low. We saw a few extraordinary efficiencies. In several ways, that window is already closed. Prices on ads are moving back up.

So if you’re a company with a good life value, strongly consider deferring some of the short term profitability and catch customers right now, as customers come online.

For several of our businesses, we see both efficiency and volume. It is not via a specific ad format or even station. We’re seeing people get more rewarding volume through YouTube and search than previously. We see more rewarding advertisement dollars during Covid-19 than previously.

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Bandholz: I’ll echo those sentiments. We’ve seen a massive boost on the Beardbrand site also. You said LTV — life worth. For folks new to exchange, it’s the total that a customer will spend. How do you calculate lifetime value? Could it be one year, two years, or the entire life of the corporation?

Holiday: It is a Wonderful question. I hate words that have subjective significance. “Lifetime value” is a wonderful example. The industry defines LTV in many distinct ways. I prefer the term”cash multiplier,” which for us is a 60-day LTV. Ecommerce owners have this joke that we will all die anticipating our LTV to appear. The reality is that we need to recognize the payback periods that we are able to handle because cash flow is king.

And so we help our clients focus primarily on 30, 60, and 90-day windows with the emphasis on that 60-day period. For most ecommerce businesses, second purchases from customers happen within 60 days of the initial one, irrespective of merchandise category. That’s the reason we focus on this 60-day window. We apply a general rule that we call the 30/100 principle, that is the idea that you will need to see your LTV increase 30 percent over 60 times and 100 percent annually. If you’ve reached these two markers, it’s an indication that you’ve discovered a continuing relationship with your customers that reflects a fantastic product-market fit.

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Bandholz: What about attribution? The challenge we’ve had is we buy advertisements on Facebook, and the customers come in through Google or anything. How can a merchant realize that advertising is performing?

Holiday: It is the biggest question, right? With the most complex response. The less diverse your media mix, the easier the challenge is to deal with. It will become difficult with a broad media usage — podcasts, radio, TV, billboards, print, everything else. The main issue is to understand what each position from the funnel of your advertising works, and ensuring that you’re not convoluting the oceans.

Here’s an example. Our company Fielder’s Choice Goods sells leather wallets. Our media mix is fairly simple: Facebook, Google, and YouTube. We define each phase very clearly. We’re conscious that Facebook ads reach people who have not been to our website — pure customer acquisition.

When you look just on at clicks, then what we know for sure is that somebody who has not been to our website, or has not been in the past 30 days and has not bought a product from us, clicked on my ad and moved to the website. I can feel secure about that as a indication of demand creation. I don’t care if the buy ends up getting assigned in Google Analytics to organic paid or search or direct search. Concerning attribution, I am less concerned about where demand grab happens and considerably more concerned with demand creation. Where did the first impetus for the purchase beginning?

So attribution is not important to us. It isn’t why an ad unit is present for us. It’s a hole that plugs up our funnel and ensures that we are capturing as much of the demand creation we possibly can. So you must consider what each ad unit intends to operate. And as you move down the funnel, it’s prospecting.

As we get to remarketing on Facebook, we’ll tighten the attribution window from a 28-day click to seven days. And then in the base of the funnel, when you get to abandoned cart asks, we’ll appear only on a one-way click basis. Since where it becomes noisy is when you start allowing attribution to be cross-pollinating between your different ad stations.

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We don’t believe in using advertising dollars to advertise to existing customers, primarily because the whole purpose of Facebook is to create an audience that you own and control. When customers are in an active window — the average time for a repeat purchase of, say, 70 days — we will exclude this group from any paid press dollars and communicate only together in email, chat, organic, societal, anywhere where it’s wholly free to advertise. We don’t want to pay for that immediate purchase, especially if we are using LTV calculations.

And that’s where you will see the most sound in Facebook advertising. You will observe merchants that market to existing customers. They’ll see a massive return on ad spend. However, it almost always comes from the combination of this email. Promotion is creating a mess.

Bandholz: What’s the advertising budget for your clients? I would imagine it’s significant.

Holiday: It’s more about earnings. A growth client is usually somewhere north of $2 million annually in revenue. That computes to somewhere around $30,000 to $50,000 a month in advertising spend. So that is kind of the entry point into the service system. However, to assist people in a prior stage, we created, again, ADMission, our community. It’s supposed to be a training, training, and teaching platform. Because hiring an agency or merely a freelancer doesn’t make sense when you are spending less than $15,000 a month. So if you happen to consider a proportion of advertising spend, that is the way a lot of agencies cost, the big companies create economies of scale and will locate an agency to charge 4% of advertising spend.

But if you’re spending $10,000 a month and you’re paying somebody $2,500 a month — a 25-percent markup — it will be challenging to be profitable. The best thing we can offer people in the first stage is training to do themselves.

Bandholz: I could talk with you another three or four hours. But we’ve to wrap this up. Where can people get more information? Where do they follow you?

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